Latest / ausbiz a.m / 01.09.26 with Heath Moss, HLM Investments
Transcript
- Andrew: Good morning and welcome to your morning wrap from OSBs. It is Tuesday, the first of September, and we are expecting further weakness on the local market. ASX futures down around one fifth percent. In a moment, we'll preview the day ahead with Heath Moss. First, though, quick wrap of where global markets finished overnight. US bond yields and oil prices rising amid ⁓ further escalation in the US, Iran wore the US dollar slightly lower, as were US equities, the SP down around a third of percent, the Nasdaq. Managed to finish in the green the Dow seven tenths of a percent lower. Among the notable movers, Amazon was down two and a half percent, Tesla gaining around five and a half percent. And oil did jump after American forces in Ireland in the Strait of Famous, and Iran responding by launching attacks on ⁓ UAE and Jordan. Brent crude. Up almost three percent to above ninety dollars a barrel, gold a little lower at four and a half thousand dollars an ounce, and Bitcoin approaching seventy nine thousand US, the Aussie close to seventy one point six US cents. Well, ⁓ joining us to get across the market moves, Heath Moss from HLM Investments. Heath, good morning. Heath Moss: Good morning, Andrew. Andrew: So of course we're at the end of ⁓ reporting season, we'll we'll get to that and what your thoughts were, but ⁓ just observations about how overseas markets have begun the week, once again that focus on hostilities in the Middle East. Heath Moss: Yeah, unfortunately we've got the the the focus on those those tensions again with ⁓ a couple of sites in ⁓ the Middle East being targeted by the US. ⁓ apparently they were gonna lay some mines or something along the those lines. But again it's just ⁓ increased those tensions and we've saw seen ⁓ oil react up three and a half percent, ⁓ gold was down, ⁓ Some of the yields moved a little bit higher. Ten year was up three basis points, two years flat, and the thirty year actually moved up four basis points. So that's seen most stocks come off. There wasn't really any major macro data coming out of last night. So we didn't have much to go on. And the US, much like our own ⁓ reporting season, is basically done. So at the moment, ⁓ the st the the markets are treading water and coming into Sort of a ⁓ choppy season at the moment. ⁓ if you look at ⁓ seasonal trends from August to October in ⁓ midterm election years, generally we see a ⁓ a bit of a correction in during this time. From Pete to Trough, we can fall anywhere from eight to nineteen percent during this time. if ⁓ seasonal trends hold. So it's something to keep in mind moving forward over the next couple of months. Andrew: Heath, ⁓ taking a look at the local market then, ⁓ with reporting season pretty much behind us now, what ⁓ I mean if you get if you would give it a a report card, how would you mark it? Heath Moss: ⁓ that's a tough one. I'd probably probably give it a s a C. I mean we we we missed expectations in terms of earnings growth. I think they were expecting about n ⁓ twelve percent earnings growth. And we got about tw nine, ⁓ led mainly by resources, energy, ⁓ and technology, ⁓ did quite well and and healthcare surprise to the upside. I think we went in way too negative on ⁓ on the likes of ⁓ CSL and Cochlear and ⁓ resume, etc. So they they ⁓ surprised us to the upside. ⁓ I mean as of about a week ago the data was we had 42% were beats, 16% misses, 42% in line. if you if you beat, you generally had a good day. It was up around 1% on the EPS if you beat. But if you missed you were down about 3.7%. So the volatility returned as we've seen over the last few ⁓ reporting seasons that that volatility was there. But it was a subpar. We had a lot of sectors struggle, the industrials, the ⁓ the retail sector, especially discretionary retail. And some of those comments came out coming out of JB High Fice so suggesting that the Australian economy is slowing and ⁓ you know consumers are not spending as much. So I at this stage I'd I'd rank it as CN one of our more poorer ⁓ earnings seasons over the recent years. Andrew: Well y I mean you talk about ⁓ healthcare, obviously those larger stocks which had been sold off dramatically over the past year or so. ⁓ look some other stocks too caught up in well, I guess you could call it the SAS pocalypse if you look at the med tech stocks, Pro Medica's been one. What did you make of its results? Heath Moss: Hmm. It was fantastic. As per usual, they they blew expectations away. There was a beat on revenue ⁓ and earnings. ⁓ and also I think on their margin as well. ⁓ the the ⁓ revenue was up ⁓ 23%, ⁓ earnings was up ⁓ just over 24%. ⁓ they saw extremely strong ⁓ sort of re-signings. They they had six contracts that were expiring during the year. And they re-signed all six, all to higher prices, mind you, as well. So that's ⁓ that record ⁓ remains at a hundred percent. And ⁓ the fact that ⁓ their biggest contract that they signed during the year, along with a couple of others, haven't even really ⁓ hit their books yet. They're guiding to a really strong full year twenty seven. ⁓ they're expecting eBay growth of over thirty percent for full year twenty seven on a constant currency basis. So ⁓ the outlook for Prometheus is fantastic. ⁓ they're also saying that AI integration sh ⁓ should start benefiting the company in the second half of twenty seven. it's just an awesome, awesome beat. And once again, it showed the quality of the company and how ⁓ this is one company that will will benefit from ⁓ AI ⁓ rather than be disrupted by it. Andrew: I if we ⁓ stick with ⁓ healthcare, in fact, ⁓ well take a look at Ansel at ⁓ Straddles Healthcare Industrial, I guess. ⁓ I know you've liked this one. What w what is it that you're seeing with Ansel at the moment? Heath Moss: Yeah, again, this one I think caught the market by surprise. Earnings came in at the ⁓ the top end of their guidance at ⁓ one forty eight per share ⁓ US, which was the top end. ⁓ eBay margin rose by fifteen percent and ⁓ sorry, ⁓ up ninety basis points to fifteen percent. overall again it was a strong ⁓ report. ⁓ the the the sh they've seen a a better response and ⁓ More sales into their premium end of the markets into both their their healthcare and industrial divisions, ⁓ been able to, you know, pass on higher costs and absorb some of those tariffs as well, which was more probably the more impressive thing as well, because they didn't pass on the full ⁓ tariff ⁓ cost, they absorbed some and yet we're still able to increase their margins, which is fantastic. ⁓ strong cash conversions of around a hundred and thirteen percent. ⁓ and their next year's ⁓ guidance, I think. ⁓ caught the the market off off guard. They ⁓ they guided to hundred between a hundred and ⁓ one dollar fifty eight and one seventy US a share EPS growth. So if you take the midpoint that's about 10%. So you know Antill has definitely recovered ⁓ from those ⁓ you know hangover days post COVID where ⁓ there was a glut of a lot of their products out in the system and they've ⁓ been able to realign the company, work down those inventories and now they're come out definitely come out the other side to what they were pre-COVID. We've always been a very high quality company, but COVID skewed things quite a bit. So I really liked their ⁓ their performance and what what they're guiding forward to ⁓ in full year twenty seven. Andrew: Heath, I know you've always got ⁓ decent exposure to the resources sector. overall, any particular standouts in that sector over reporting season? Heath Moss: Yeah, outside of BHP, BHP's report was fantastic and ⁓ you know, copper now dominates their their profit result. But ⁓ another copper stock I've got exposure to with clients and myself is Sanfire Resources. ⁓ a fantastic result. Obviously they benefited a lot from the higher copper price. ⁓ that's that goes without saying, but their ⁓ their their mines in Botswana and Spain ⁓ performed really, really well despite Probably a a ⁓ disappointing fourth quarter from what what I've read. ⁓ but it's the the balance sheet that's impressed me most ⁓ as well. They were able to go from ⁓ a net debt position of 123 million to a net cash position of around three hundred and fifty million US. And that's because of ⁓ you know, their free cash flow jumped to four hundred and ninety-one million dollars. So now they've got no bank debt, they've got a undrawn six hundred and fifty million. ⁓ dollar loan they can ⁓ tap whenever they want and $350 million cash. So they got over a billion dollars in liquidity now. ⁓ they they produce about $154,000 tons of copper you know guiding to similar next year between $150 to $166 ⁓ thousand tons. But I think they'll be in the MA space or you know looking for new projects given the the billion dollars worth of liquidity they got out there. We we know they've already done a JV with ⁓ the Havlar here in South Australia for their Kowkaroo project, which they're gonna look to advance and eventually ⁓ go to mine. ⁓ but I think they'll be on the lookout for more and ⁓ I think their Botswana ⁓ project starts ramping up a little bit more this year as well. So I think they'll come in towards the higher end higher end of that production target. Andrew: So mm, I'm assuming then you're thinking that ⁓ copper has a lot further to run. Heath Moss: Yeah, look I mean it's it's a tough one with copper. We it's sitting around what around the s it was sitting around the six seventy a pound. I can't remember what it's doing this morning. ⁓ I think it's come off a little bit. ⁓ we do have tariff decisions around copper soon. ⁓ a little bit edgy there. I've taken some money off the table in the likes of Sandfire and Capstone and that, simply because ⁓ the last time we did this in July last year and the market didn't get what it was expecting with when the tariffs came around for copper and copper came off twenty five percent that day. So I'm just a little bit wary there of what Trump and and the administration are gonna do with the the copper tariffs and and and what and then aluminium comes in under this as well. ⁓ the the sort of caught under this same thing. But it's ⁓ the the decision was due in July. So it should could come any day now. And I don't want to be caught out holding everything if some if it goes against me. I mean if it go if it if it goes the other way, I think it's mostly priced in. Those tariffs are are mostly pri priced in. But if it goes the other way then I I think it could come off heavily again. So I'm just, you know, taking a little bit off the off the table here. Andrew: Ha o overall, how would you describe your investment outlook at the moment? Are you just a little bit cautious? Are you holding ⁓ elevated levels of cash? Heath Moss: ⁓ not ⁓ I'd say about ten percent cash with clients, which is maybe a little bit up ⁓ generally hold about five percent because you know, most clients want to be fully fully invested and get the most out of their ret returns. I am a little bit more cautious simply because of those seasonal trends that I mentioned before in midterm election years where we, you know, between August and October we generally do have a small correction. So, you know, I just want to be a little bit more. Prepare for that, take take some advantages there. If we do get a sell-off resources, then you know I can grab some more or you know grab some more quality stocks in the ⁓ the AI trade as well. So that's that's how I'm just sitting at the moment. Andrew: Heath, always great to get your perspective. Thanks for joining us from HLM Investments. And that is your Ausbiz morning wrap. Hope you have a great day. I'm Andrew Gagan. Thanks for listening. Heath Moss: Thanks having me.